Private equity managers are increasing investment in data, analytics and AI to cope with rising operational complexity and investor expectations, according to a general partner survey by MSCI.
Technology has become the industry’s biggest capability gap as firms come under pressure to show realised returns rather than paper valuations, the research found. Limited partners are asking for evidence that portfolio gains will translate into cash distributions, leading managers to reassess their operating models.
Nearly half of respondents identified advanced data, technology and AI capabilities as the biggest gap in their organisations. The challenge was tougher among mid-sized firms, where 63% highlighted technology as their biggest weakness.
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The survey also highlighted a gap between the risks managers are most concerned about and their readiness to address them. AI and technology risks emerged as the area where preparedness lags furthest behind concern.
While 52% of respondents said they were worried about AI and technology-related risks over the next two years, only 36% believed their organisations were adequately prepared to manage them.
MSCI also found that emerging risks are evolving faster than governance frameworks, leaving firms exposed not only to technology-related issues but also to geopolitical risks. Many private equity firms will need to boost governance structures alongside technology investment to keep up with the changing market environment, according to the researchers.
The industry’s ability to scale will depend on modernising infrastructure and workflows rather than relying solely on fundraising or capital deployment, shared MSCI.
